Winnipeg (Resource News International) — Farmers who are able to wait until late spring or early summer to buy fertilizer are likely to see lower prices, David Asbridge told participants at the Canadian Wheat Board’s annual GrainWorld conference in Winnipeg.
Asbridge is the client development manager and senior economist for Doane Advisory Services in St. Louis, Mo.
Looking ahead to the spring planting season, Asbridge said his first recommendation to growers is to shop around at various fertilizer dealers before making any purchases. Many dealers stocked up on high-priced fertilizer while they were still expecting normal fall demand and are now sitting on expensive product that needs to be moved, Asbridge warned.
Also, fertilizer prices should begin to ease once the main part of the U.S. spring planting season has passed and summer begins, he said.
Nitrogen prices may even fall sharply depending on how weather and seeding turn out in the U.S. this spring, Asbridge said. If the U.S. has a favourable spring, expect to see urea prices tick back up by $40 to $50 per tonne in the next six to eight weeks before beginning to pull back, he said.
Phosphate prices will remain steady to slightly lower as farmers cut back their phosphate applications as much as they can afford to, Asbridge said. Potash prices, which have not fallen to the same extent as other fertilizers, will drift lower, he predicted.
However, the window of time to capitalize on softer late spring-early summer input costs may be narrow, Asbridge warned. As prices fall, fertilizer companies will begin to lower output to draw down supply. That may create spot-shortages at fertilizer dealerships in the summer months.
“Buy when you feel comfortable that you’ve shopped around but don’t wait too long,” Asbridge told the conference participants.
Looking back over the 2007-08 crop year, Asbridge said strong growth in world demand, reduced production capacity from 2002 to 2006, escalating fertilizer input costs, currency fluctuations, a spike in ocean freight rates, China’s fertilizer export tax increase, a rise in commodity prices, and increased global acreage all combined to push fertilizer prices to record levels.
Higher crop prices were also psychologically important as they allowed fertilizer companies to raise prices without eliciting an outcry from farmers, he added.
As costs climbed, however, demand destruction began to put downward pressure on fertilizer prices, he said. Fall fertilizer demand also fell because many farmers were undecided about their spring planting intentions, Asbridge said.
Potash wholesale prices have been the exception, he noted. Potash production disruptions in Canada and Russia, the world’s largest potash producers, cut into supplies and helped to prop up values, he said.
During his presentation, Asbridge also provided his U.S. spring planting predictions, saying he expects U.S. soybean acreage to increase by four million acres and corn acreage to stay flat or possibly even slip lower compared to last year’s levels.